Montage Resources Corporation Announces Initial 2019 Financial and Operating Guidance, Schedules Fourth
Quarter and Full Year 2018 Earnings Release and Conference Call Date, and Provides Information on 2019 Analyst Day
Montage Resources Corporation (NYSE:MR) (the “Company” or “Montage”) (formerly known as Eclipse Resources Corporation, “Eclipse
Resources”) is pleased to announce its initial 2019 financial and operating guidance, schedule its fourth quarter and full year
2018 earnings release and conference call, and provide information regarding its upcoming 2019 Analyst Day.
The 2019 financial and operating guidance highlights include:
- 2019 estimated net capital expenditures of between $375 million to $400 million allocated
almost entirely to revenue-generating drilling and completions activity and focused on low risk, highly deliverable locations
that the Company believes maximize return on invested capital
- 2019 estimated net daily production sales volumes of between 500 to 525 million cubic feet equivalent
per day ("MMcfe"); when adjusting the 2019 daily production sales volumes guidance to a full 12 month pro forma basis, this
equates to approximately 16% production growth over 2018 results1
- Expected achievement of cash flow neutrality by the end of 2019 with a year-end 2019 leverage ratio
of approximately 2.0 times
1 Based upon 2018 production from Eclipse Resources Corporation and Blue Ridge Mountain Resources,
Inc.
President and Chief Executive Officer, John Reinhart commented, "Our 2019 guidance demonstrates the strategic shift
underway at Montage as we focus on financial, operational and organizational efficiencies in order to deliver value to our
stakeholders. We believe the quality and depth of the Company’s inventory of locations will allow us to achieve double-digit
production growth while focusing on cash flow generation in our highly economic core areas. We are excited to announce a capital
program in 2019 that we expect to be predominantly funded from operating cash flow and augmented by existing liquidity while
providing cash flow neutrality by the end of 2019.”
2019 Production and Capital Budget Guidance
The Company possesses a deep inventory of both liquids-rich and dry locations in the Utica Shale and Marcellus Shale that the
Company believes will deliver impressive production growth and strong cash margins. First quarter and full year 2019 guidance are
set forth in the table below:
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Q1 20191 |
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FY 20192 |
Production MMcfe/d |
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385 - 395 |
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500 - 525 |
% Gas |
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73% - 77% |
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74% - 78% |
% NGL |
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12% - 17% |
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12% - 15% |
% Oil |
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9% - 11% |
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9% - 11% |
Gas Price Differential ($/Mcf)3,4 |
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$(0.20) - $(0.30) |
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$(0.20) - $(0.30) |
Oil Differential ($/Bbl)3 |
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$(6.50) - $(7.00) |
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$(6.50) - $(7.50) |
NGL Prices (% of WTI)3 |
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40% - 45% |
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40% - 50% |
Cash Production Costs ($/Mcfe)5 |
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$1.55 - $1.65 |
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$1.55 - $1.65 |
Cash G&A ($mm)6 |
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$8 - $10 |
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$34 - $38 |
CAPEX ($mm) |
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$375 - $400 |
1 Includes activity for Blue Ridge Mountain Resources, Inc. from March 1,
2019 through March 31, 2019 |
2 Includes activity for Blue Ridge Mountain Resources, Inc. from March 1,
2019 through December 31, 2019 |
3 Excludes impact of hedges |
4 Excludes the cost of firm transportation |
5 Includes lease operating, transportation, gathering and compression,
production and ad valorem taxes |
6 Non-GAAP financial measure which excludes non-cash compensation and merger related
expenses; see the discussion and reconciliations
to the most comparable GAAP measure under “Cash General and Administrative Expenses” below in this press release
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The 2019 estimated capital budget range of $375 million to $400 million is based upon a two rig drilling program
allocated approximately 55% to liquids-rich locations and approximately 45% to dry gas locations. Just over 90% of the capital
expenditure program in 2019 has been designated to drilling and completion activity in order to maximize the return on invested
capital. The Company’s 2019 development plan implements a shift in focus to reducing cycle times and improving capital efficiency
in order to accelerate cash flow and achieve the highest possible returns. In order to realize these improved cash flows as well as
de-risk the operational execution of its development program, the Company plans to optimize many operational parameters, including
reducing its planned lateral length spuds to an average of approximately 11,700 feet and lowering its initial development pad size
to approximately four initial wells per pad. In addition, the Company has seen strong production results from its first operated
well in its Flat Castle area located in North Central Pennsylvania and will be assessing multiple options with respect to achieving
enhanced value for that asset within the Company’s portfolio.
Net production sales volumes for 2019 are expected to be between 500 to 525 MMcfe per day with approximately 76% of 2019
production from natural gas and approximately 24% from oil and natural gas liquids. The net production profile for 2019 will be
weighted toward the second half of the year due to limited completion activity during the fourth quarter of 2018 and the first
quarter of 2019. In addition, a number of the wells turned to sales over the past six months were wells associated with the joint
venture agreement with Sequel Energy, which is expected to be completed during the first half of 2019, therefore net production
sales volumes are anticipated to accelerate during the second half of 2019 as the Company moves toward development of its higher
working interest locations. The projected production profile for 2019 is significantly above the Company’s firm transportation
commitments and provides multiple options regarding the Company’s allocation of development activity between liquids-rich and dry
gas locations during the second half of 2019, while also allowing the Company the potential to maximize its realized natural gas
price from a balanced portfolio of sales points both in-basin and out-of-basin.
With respect to cash production costs, Montage will begin delivering a portion of its NGL sales volumes to the Mariner East 2
pipeline project during the first quarter of 2019 and expects to realize an increase in its transportation costs of approximately
$0.08 to $0.10 per Mcfe over historical cash production costs while also seeing an incremental increase on a per unit basis from a
full year of Rover capacity utilization. The Mariner East 2 project, coupled with the higher NGL contractual price realizations
related to the production sales volumes from Blue Ridge Mountain Resources, Inc., are expected to allow Montage to realize an
improvement to historic NGL pricing that is incrementally positive to the Company’s NGL cash margins.
Financial Update
As previously announced, the Company amended and restated its revolving credit facility, increasing the borrowing base from $225
million to $375 million and extending the maturity date to 2024. In addition, the Company has reduced the letters of credit
outstanding under its revolving credit facility by approximately 50% to approximately $13.5 million due to the improved credit
profile of the Company. The Company believes that this increase in liquidity, combined with the anticipated significant incremental
cash flow from the merger with Blue Ridge Mountain Resources, Inc., is expected to position Montage with peer-leading leverage
metrics and significant financial flexibility to develop its inventory of high quality assets and position itself for future
accretive strategic opportunities.
The Company has a strong hedging portfolio in place and actively manages its exposure to commodity prices through a number of
commodity trading program strategies as a risk management tool to mitigate the potential negative impact on cash flows caused by
price fluctuations in natural gas, NGL and oil prices. As of February 28, 2019, the Company has approximately 69% of its projected
2019 natural gas production hedged at an average floor price1 of $2.78 per MMBtu and an average ceiling price of
approximately $2.99 per MMBtu. The Company has approximately 38% of its projected 2019 crude oil production hedged at an average
floor price price1 of $52.20 per Bbl and an average ceiling price of $61.28 per Bbl.
1 For the purposes of calculating three-way floor price, the higher put value was used
Earnings Release and Conference Call
The Company will release fourth quarter and full year 2018 financial and operational results for the former Eclipse Resources on
Tuesday, March 12, 2019 after the market close. A conference call to review the Company’s fourth quarter and full year financial
and operational results is scheduled for Wednesday, March 13, 2019 at 10:00 a.m. Eastern Time. To participate in the call, please
dial 877-709-8150 or 201-689-8354 for international callers and reference Montage Resources Fourth Quarter and Full Year 2018
Earnings Call. A replay of the call will be available through May 12, 2019. To access the phone replay dial 877-660-6853 or
201-612-7415 for international callers. The conference ID is 13687946. The webcast will be archived for replay on the Company’s
website for six months.
Analyst Day
The Company is pleased to announce that it will host an Analyst Day on Wednesday, March 20, 2019 at the JW Marriot Hotel in
Houston, Texas. A live audio webcast of the event will begin at 9:00 am (Central) and can be accessed on the “Investors” section of
the Montage Resources website at
www.montageresources.com which will be launched shortly. The Company plans to post the Analyst Day Presentation to the
“Investors” section of the Company’s website just prior to the event.
About Montage Resources
Montage Resources is an exploration and production company with approximately 227,000 net effective undeveloped acres currently
focused on the Utica and Marcellus Shales of southeast Ohio, West Virginia and North Central Pennsylvania.
Cash General and Administrative Expenses
Cash General and Administrative Expenses is a non-GAAP financial measure used by the Company in the Guidance Table to provide a
measure of administrative expenses used by many investors and published research in making investment decisions and evaluating
operational trends of the Company. See the table below for a reconciliation of Cash General and Administrative Expenses and General
and Administrative Expenses.
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Guidance |
$ thousands |
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For the Three Months
Ending March 31, 2019
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For the Year Ending
December 31, 2019
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General and administrative expenses, estimated to be
reported |
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$29,000-$38,000 |
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$73,000 - $90,000 |
Stock-based compensation expense |
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(6,000 - 8,000) |
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(9,000 - 12,000) |
Cash general and administrative expenses |
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$23,000 - $30,000 |
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$64,000 - $78,000 |
Merger related expenses |
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(15,000 - 20,000) |
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(30,000 - 40,000) |
Cash general and administrative expenses, excluding merger related
expenses
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$8,000-$10,000 |
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$34,000 - $38,000 |
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical
fact included in this press release, regarding Montage Resources’ strategy, future operations, financial position, estimated
revenues and income/losses, projected costs and capital expenditures, prospects, plans and objectives of management are
forward-looking statements. When used in this press release, the words “plan,” “endeavor,” “will,” “would,” “could,” “believe,”
“anticipate,” “intend,” “estimate,” “expect,” “project,” “delivering,” position,” and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking
statements are based on Montage Resources’ current expectations and assumptions about future events and are based on currently
available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep
in mind the risk factors and other cautionary statements described in “Item 1.A. Risk Factors” in the Company’s’ Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 2, 2018, as amended (the “2017 Annual Report”), and the
Company’s Quarterly Reports on Form 10-Q, as well as under the heading “Risk Factors” in the definitive consent solicitation
statement/information statement/prospectus related to the combination with Blue Ridge filed by the Company with the Securities and
Exchange Commission on January 28, 2019.
Forward-looking statements may include, but are not limited to, statements about Montage Resources’ business strategy;
reserves; general economic conditions; financial strategy, liquidity and capital required for developing its properties and timing
related thereto; realized natural gas, NGLs and oil prices; timing and amount of future production of natural gas, NGLs and oil;
its hedging strategy and results; future drilling plans; competition and government regulations, including those related to
hydraulic fracturing; the anticipated benefits under commercial agreements; marketing of natural gas, NGLs and oil; leasehold and
business acquisitions; the costs, terms and availability of gathering, processing, fractionation and other midstream services; the
costs, terms and availability of downstream transportation services; general economic conditions; credit markets; uncertainty
regarding future operating results, including initial production rates and liquid yields in type curve areas; and plans,
objectives, expectations and intentions contained in this press release that are not historical, including, without limitation, the
guidance set forth herein. Forward-looking statements also may include statements relating to the combination with Blue Ridge,
including statements regarding the combined company and its operations, integration and transition plans, synergies, cost savings,
opportunities, anticipated future performance, benefits of the transaction and its impact on the combined company’s business,
operations, assets, results of operations, liquidity, and financial position, and any statements of assumptions underlying any of
the foregoing.
Montage Resources cautions you that all these forward-looking statements are subject to risks and uncertainties, most of
which are difficult to predict and many of which are beyond the Company’s control, incident to the exploration for and development,
production, gathering and sale of natural gas, NGLs and oil. These risks include, but are not limited to, legal and environmental
risks, drilling and other operating risks, regulatory changes, commodity price volatility and declines in the price of natural gas,
NGLs, and oil, inflation, lack of availability of drilling, production and processing equipment and services, counterparty credit
risk, the uncertainty inherent in estimating natural gas, NGLs and oil reserves and in projecting future rates of production, cash
flow and access to capital, the timing of development expenditures, and the other risks described in “Item 1A. Risk Factors” of the
2017 Annual Report and the Company’s Quarterly Reports on Form 10-Q. In addition, forward-looking statements are subject to
risks and uncertainties related to the combination with Blue Ridge, including, without limitation, failure to realize or delays in
realizing expected synergies or other benefits of the transaction, difficulties in integrating the combined operations, disruption
of management time from ongoing business operations due to the transaction, adverse effects on the ability of the combined company
to retain and hire key personnel and maintain relationships with suppliers and customers, negative effects of consummation of the
transaction on the market price of the Company’s common stock, transaction costs, unknown liabilities or unanticipated expenses,
and the other risks described under the heading “Risk Factors” in the definitive consent solicitation statement/information
statement/prospectus related to the combination with Blue Ridge filed by the Company with the Securities and Exchange Commission on
January 28, 2019.
All forward-looking statements, expressed or implied, included in this press release are expressly qualified in their
entirety by this cautionary statement and are based on assumptions that Montage Resources believes to be reasonable but that may
not prove to be accurate. This cautionary statement should also be considered in connection with any subsequent written or oral
forward-looking statements that Montage Resources or persons acting on its behalf may issue. Except as otherwise required by
applicable law, Montage Resources disclaims any duty to update any forward-looking statements to reflect new information or events
or circumstances after the date of this press release. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.
Montage Resources Corporation
Douglas Kris, Investor Relations
814-325-2059
dkris@mresources.com
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